By USDR
Completing your taxes doesn’t need to be a confusing process, but the fact remains that every year, thousands of American citizens make mistakes when they file—many of which are easy to avoid with a little extra time and diligence. Making any of these mistakes can result in serious consequences, ranging from delayed reimbursement to incarceration. Be sure you avoid finding yourself in hot water with the IRS by remaining aware of these easy to avoid mistakes when you file your taxes this year.
- Hobby versus Business
Make sure you don’t file your hobby incorrectly as a business. If you sell homemade gift items on Etsy, or take photos of the occasional family member for money, don’t be too quick to write your expenditures off as business expenses. If the IRS is to decide that your claim is not a legitimate business, you could end up paying a lot more. In order to demonstrate to the IRS that your business is actually applicable for tax deductions, you must qualify under these terms: you must turn a profit for 3 out of 5 years (it’s usually safe to file business losses for the first two years because of this). If you’re still unsure, talk with a tax professional to find out if claiming business losses could work against you on your tax filing.
- Questionable Deductions
Don’t flag the IRS’s attention by claiming what they may deem to be questionable deductions. The most commonly investigated deductions include a home office if you’re self-employed or large donation write-offs. Including these to make your tax return larger could come back to bite you, as they may be suspicious enough to trigger an IRS audit.
- Don’t Keep Secrets
Don’t ever attempt to hide things from the IRS. Omitting extra income, for example, income made from renting out your home on a site like Airbnb, can cost you in the long run. The government will notice the extra income and failing to pay can be disastrous. Don’t hide foreign income. Rent, dividends, and interest are all still taxable in the United States, even if you’re paying taxes in another country (although you may qualify for a tax credit).
- Watch Your Direct Deposit
Most of us want to see our tax return as quickly as possible, and using direct deposit is the quickest way to go. However, making a mistake when entering your bank account number could lose you your refund, or delay receipt of it for months. If you put in the wrong account number, your refund could find its way into the hands of another taxpayer, or be returned to the IRS, never to be seen again.
- Be Diligent with the Details
Even the smallest of incorrect details can land you in big trouble with the IRS during the tax filing process, so be diligent with the details. Common errors that are easily avoided on your returns include name misspellings, wrong social security number entry, and incorrect math. Taking the time to recheck your tax filings is worth the money and headaches it could cost you later on should the IRS locate a problem. Another easy mistake to avoid? Entering the wrong filing status. Take the couple of minutes it takes to ensure you’re filing under the correct title, whether it be the Head of Household or Single, which you can easily determine on IRS.gov.
- Not Seeking Professional Help
If you have a ton of tax issues and write offs that you’ll need to get a handle on, or you’re a freelancer who must follow different tax requirements, trying to do your taxes on your own could be your biggest mistake. Using an e-filing tax service from a website like www.communitytax.com ensures your taxes are filed correctly every time. You’ll be walked through the process quickly, making your tax filing process more efficient and your chances of getting audited less likely.
Make things easier on yourself as tax season approaches. Prepare all your necessary materials and stay organized; putting in the extra effort now can make avoiding these mistakes easier than ever to ensure you stay on the right side of the IRS this year. Consider using a professional and do your research thoroughly if you plan to do your filing on your own.